Peter Engel

Why is a Seafood Traceability Program So Important to the US Shrimp Industry ?

SSA Washington DC Consultant Glenn Delaney, accompanied by SSA Executive Director John Williams and SSA Attorney Nathan Rickard, recently presented the following statement to the White House Office of Management and Budget regarding the critical importance of the implementation of a secure seafood traceability program designed to combat fraud, IUU fishing and labor abuses associated with shrimp imports.

The Administration is expected to issue a final rule to implement this seafood traceability program in the coming weeks and this statement provides background for why this program will be so important to the US shrimp industry.

Statement of Glenn Roger Delaney on Behalf of Southern Shrimp Alliance and SICPA

The Southern Shrimp Alliance membership is comprised of shrimp harvesters and associated shoreside enterprises in all eight of the shrimp producing states including North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana and Texas.

SICPA is a global leader – if not the global leader in the development and application of secure traceability marking and information systems.

Our objective is to convince you that implementation of a truly secure traceability system for shrimp imports is essential to combatting extensive international and domestic fraud that –

presents very serious health threats to millions of US consumers,

costs the US Treasury tens if not hundreds of millions of dollars in lost antidumping duty revenue annually, and

has had profound economic impacts on what was once the most valuable fishery in the US.

Shrimp is the most consumed seafood in US at about 4lbs per capita which is about 25% of the seafood consumed in the US per capita

It is the largest seafood import at about $5-6b annually. About 90% shrimp consumed in the US is imported.

Approximately 65% of the value of the seafood imports covered by the proposed seafood traceability program is shrimp

The surge in US shrimp imports began in about 2001 with the global development of shrimp farming.

Shrimp farm unit production costs were dramatically reduced through use of veterinary drugs – antibiotics and perhaps fungicides – banned for human consumption by the FDA. Their use allows for very high stocking densities and disease prevention. Direct human health threats include aplastic anemia and cancer. Indirect threats include antibiotic resistance – evolution of superbugs.

Import pricing (dumping) collapsed the US fishery. Shrimp fishing effort in the Gulf is now approximately 70% less than the 2001-2003 baseline level. Yet, shrimp remains the most valuable fishery in Gulf and is in top 3 nationally in any given year. Our industry represents a significant component of the economies of coastal communities in 8 States.

In 2005 the US imposed antidumping duties on 6 nations. SSA provided the industry leadership behind the petition to impose these duties. Today duties remain in place for 5 of them including Brazil, China, India, Thailand and Vietnam. The purpose is, of course, to offset/mitigate the anticompetitive impacts of unfair trade (dumping) on a very important US industry.

Separately, FDA has increasingly improved its targeted inspections of imported shrimp for illegal antibiotics. Hundreds of shipments test positive each year. FDA Import Alerts are issued on both individual companies as well as country-wide on China and Malaysia. Import Alerts result in detention without physical examination of future shipments.

Shrimp importers have a powerful incentive to evade antidumping duties and FDA Import Alerts. Such evasion is sophisticated, using various methods to misrepresent/mislabel product, transship through nations not subject to duties or Import Alerts, port shop in the US, use layers of paper companies with complicated business relationships designed to obfuscate, among other methods.

SSA, in particular Executive Director John Williams and my colleague here today, Nathan Rickard, work very closely with Federal agencies (CBP, FDA, NOAA) to assist in the investigation of this fraudulent activity that again, has cost the US Treasury tens if not hundreds of millions of dollars in uncollected duties, has exposed many millions of US consumers to dangerous chemical residues, and has done serious damage to our industry.

Please also note that shrimp fisheries, farms and processing facilities in some exporting nations have well documented IUU and/or labor abuse issues. Our research indicates that IUU fish is also used to produce feed for foreign shrimp farms.

With all that in mind, SSA sees the proposed seafood traceability program as a powerful tool to combat those sophisticated efforts to evade US duties and FDA Import Alerts. As such, we believe the program will vastly enhance the Federal government’s ability to mitigate the impacts of unfair trade on our fishery and many fishery dependent communities, and to protect the health of millions of Americans. It is likewise a very powerful tool to combat slave labor and IUU fishing.

Thus, we urge you to implement the seafood traceability program.

SSA has submitted numerous public comments for the record in support and on the details of this program and will not repeat those here.

That said, we have a few points to emphasize that we feel are absolutely critical for you to consider.

To be effective the proposed Traceability system must be secure. Seafood fraud is sophisticated organized crime sometimes with the facilitation of foreign local and/or national government entities. Based on SSA’s extensive experience in investigating fraud, we believe a significantly higher level of security must be built into the key elements of this system than perhaps has been contemplated by some NOC agencies- or by the seafood industry itself. Those key elements requiring security are –

the marking/labeling of products,

the production and issuance of associated government documents, and

the data base and information system used to trace the supply chain.

We believe the ability of enforcement agencies including CBP, FDA and NOAA to implement a reliable audit system absolutely depends on the application of an effective security strategy to each of these elements of the traceability system.

With that in mind, we also believe it would be extremely beneficial to perform a pilot project on a discrete seafood supply chain to demonstrate the product marking, government document and information system security that will be needed for an effective program.

We are in process of developing such a demonstration project being spearheaded by CBP in partnership with our colleagues here from SICPA that is intended to address the transshipment of Chinese shrimp through Malaysia used by Chinese shrimp importers to evade both US AD duties and the FDA country-wide Import Alert on China.

Our colleagues from SICPA – Peter Engel and Ken Brown — who are again perhaps the global leaders in traceability system development and operation, will further elaborate on the need for elevated security in product marking, government documents and the database/information systems in order for this traceability system to be effective, and how they can provide that security.

Finally, I stress that in addition to addressing the specific China/Malaysia transshipment problem, we believe this project will also provide broader benefits including –

the necessary structure for a trusted trader program as envisioned by CBP

a model for capacity building in foreign nations to develop and improve their enforcement capabilities

a template for application to other seafood products both wild and farmed, and to other exporting nations.

2. The Proposed Rule indicates that the implementation of the seafood traceability program may be indefinitely delayed with respect to shrimp imports. This is due to the potential vulnerability to a WTO challenge as suggested by USTR. In theory, such a challenge would be based on the concern that the Federal government may not have access to the same data elements for domestic shrimp farm production as it will require for shrimp imports under the traceability program.

SSA has aggressively engaged on this issue with USTR and CEQ and worked hard to support the efforts of NOAA to resolve this issue. Based on this effort we believe that the required information is collected by the domestic shrimp farm industry in order to respond to potential FDA recalls. We have been further advised that authorities under the Paperwork Reduction Act might provide a basis for FDA to share this information with other Federal agencies for the purpose of implementing the seafood traceability program.

Given that 65% of the imports covered by the proposed program are shrimp, given the scale and scope of fraud associated with imported shrimp, and given the implications of that fraud for the health of millions of US consumers, the US Treasury and the US shrimp industry, we urge you – in the strongest sense of that word – to resolve this issue favorably and move forward with the full and timely implementation of the program for shrimp. I trust we all share that critical objective.

As a final point, I note that I also have extensive background in the international conservation and management of tunas including efforts to combat IUU fishing in global tuna fisheries in part due to the anticompetitive impacts on US tuna and swordfish fisheries. Thus, I want to be clear that I am very sensitized to the need to combat IUU fishing and share a strong desire to address that problem globally. And, while we see progress being made on IUU fishing by the tuna RFMOs every year, it is also clear that a secure traceability system must be applied by the US to the trade in tuna and swordfish.

However, when considered in the context of direct impacts on US interests – our economy, our Treasury, the health of our consumers and our shrimp industry – the magnitude of adverse impacts of fraud associated with shrimp imports on US interests simply transcends that of any other source of seafood fraud and, indeed, foreign IUU fishing. The numbers are huge. And so, while the proposed seafood traceability program certainly should and will generate essential benefits for global fishery conservation and sustainability, first and foremost it is a US program that should first and foremost focus on preventing adverse impacts to US interests. It is that context that provides even greater emphasis for this program to move forward aggressively – and, of course, to include shrimp imports.

Why is a Seafood Traceability Program So Important to the US Shrimp Industry ? SSA Washington DC Consultant Glenn Delaney, accompanied by SSA Executive Director John Williams and SSA Attorney Nathan Rickard, recently presented the following statement to the White House Office of Management and Budget regarding the critical importance of the implementation of a secure seafood traceability program […]